Week of December 11, 2011 thru December 17, 2011

Ldn FX: Widespread Demand Continues To Underpin Sterling

LONDON, Dec. 16 (MNI) - Sterling continued to enjoy widespread demand through European morning trade Friday, continuing the pattern seen Thursday.

Cable managed to make a brief show above resistance at $1.5550, but was quickly sold back - but correction remained shallow and was keeping focus on further upside gains. A paring back of risk aversion positions was seen ahead of the weekend.

STERLING SUMMARY: Opened early Europe at $1.5531 stg0.8388

-- Cable closed in NY at $1.5512, with rate seen recovering off NY

pullback lows of $1.5474 as traders reported decent widespread demand for the pound (apart from real money).

EBA Enria:Shd Have Higher Cap Levs In Place If Crisis Worsens

ROME (MNI) - Although increased bank capital requirements may be pro-cyclical, they will be useful if the crisis deteriorates, European Banking Authority Chairman Andrea Enria said Friday.

Speaking at a conference in the Italian capital, Enria conceded there is some question as to whether requiring banks to raise capital under the current circumstances is helpful or merely reinforces the current economic slowdown, as many senior Eurozone officials have asserted in recent days.

However, "it will be surely better to have those buffers already available ...if the crisis gets worse and losses materialize," he argued.

--Frankfurt bureau tel.: +49-69-720142. Email: dbarwick@marketnews.com

[TOPICS: MT$$$$,M$X$$$,M$$CR$,MGX$$$]

ECB Nowotny: "Immediate" EMU Refinancing Problems In February

VIENNA (MNI) - The Eurozone will face "immediate refinancing problems" as soon as February, European Central Bank Governing Council member Ewald Nowotny told journalists here today.

He noted that the refinancing need for Eurozone national governments, excluding deficit financing, will amount to around E1.3 trillion in 2012. In addition, there will be some E1 trillion worth of refinancing needed by the banking sector in the region, Nowotny, who is governor of the Austrian National Bank, added.

"It is necessary to take measures both long-term and also short-term for addressing the immediate problems which will be arising already in February," he said.

Slovakia To Open At Least Three New Bond Lines In 2012

LONDON (MNI) - Slovakia is planning to issue at least three new bonds in 2012, which will include a new 3-year, 10-year and a 5-year plus maturity bond, depending on market conditions, Ardal, the country's Debt and Liquidity Management Agency, said on Friday.

"Another bond line can be opened if required by investors," Ardal said, adding that auctions will be held on a monthly basis in 2012.

"At the same auction date in line with the demand of investors, more bonds with different maturities can be auctioned," the agency said. "It means that in order to be more flexible almost all auctions will be 'for decision.'"

Under Slovak law there is a maximum size that is issued for each bond, under auction terms and conditions.

BOE: UK Banks Cut French, Boost German Exposure In Q3

London (MNI) - UK banks slashed exposure to France, lowered exposure to Italy and Spain and boosted Dutch and German exposure in the third quarter, according to Bank of England data.

The data show UK banks gravitating towards the "hard core" of the euro area and limiting exposure to some of the under pressure parts of the Eurozone.

The BOE's analysis showed foreign claims on developed countries by UK banks and building societies rose by US$11.8 billion to US$2,638.7 billion in Q3.

This rise was driven by increased claims on Germany and the Netherlands, with German exposure rising by US$40.3 billion and to the Netherlands by US$21.1 billion.

Analysis: EMU October SA Trade Balance Higher Than Expected

Seasonally adjusted results:

October: +E300 million

MNI survey median: +E100 million MNI survey range: -E2.8 bln to +E900 mln

(Including Estonia):

September: +E2.2 bln (revised from +E2.1 bln) August: -E1.0 bln (revised from -E1.2 bln) July: -E3.1 bln (unrevised) June: -E2.3 bln (unrevised) May: -E1.1 bln (revised from -E1.2 bln)

Non-seasonally adjusted results:

October: +E1.1 billion

September: +E2.7 bln (revised from +E2.9 bln) August: -E4.5 bln (revised from -E4.4 bln) July: +E2.4 bln (revised from +E2.5 bln) June: +E0.3 bln (revised from E0.0 bln) May: -E0.4 bln (unrevised)


FRANKFURT (MNI) - The Eurozone trade surplus shrank less than generally expected in October, while results fo

Analysis: Eurozone Labor Cost Gains Slowed Markedly In 3Q

Eurozone nominal hourly labour costs, workday-adjusted y/y:

total wage costs non-wage costs

3Q11 +2.7% y/y +2.6% y/y +3.2% y/y 2Q11 +3.3% y/y +3.2% y/y +3.8% y/y 1Q11 +2.5% y/y +2.3% y/y +3.4% y/y 4Q10 +1.7% y/y +1.6% y/y +2.0% y/y 3Q10 +1.2% y/y +1.1% y/y +1.5% y/y


PARIS (MNI) - The annual increase in Eurozone labor costs slowed markedly in 3Q to 2.7%, reflecting weaker gains in both wages and employer payroll contributions, Eurostat said Friday.

After an acceleration from the middle of last year, labor cost trends peaked in 2Q with an annual rise of 3.3% (revised down from +3.6).

BoE King: Anchored Expectations Debt-Inflation Spiral Risk

ROME (MNI) - Keeping inflation expectations under control serves to limit the danger of a debt-inflation spiral, Bank of England Governor Mervyn King said Friday.

Speaking at a conference in the Italian capital, King said: "By anchoring inflation expectations, monetary policy can minizmize the risk of the kind of debt-inflation spiral which we have been worrying about for too long."

"Price inflation can cause misperceptions about the future state of the economy, which makes it more difficulty for lenders ... to assess the quality of borrowers," he said.

"For monetary policy to work," King said, "a stable financial system" is needed.

ECB Announces Two 1-Day Liquidity Providing Fine Tuning Ops

FRANKFURT (MNI) - The European Central Bank said Friday it has decided to conduct two one-day liquidity providing fine-tuning operations, the first one to be allotted on December 20 and the second on February 28 of 2012.

Each of the operations will settle the day after allotment and will mature the day after settlement. The operations will be launched at 0830 GMT/0330 EDT on allotment day, and the deadline for bid submissions is 0905 GMT/0405 EDT.

The ECB also noted that two regular weekly MROs will mature on December 21 and February 29.

It said that the first of two 3-year refinancing operations it announced last week would settle on December 22 and the second on March 1.

France's Fin Min:2011 Deficit Goal To Be Met Even If Downturn

PARIS (MNI) - French Finance Minister Francois Baroin said Friday that France would meet its deficit target for 2011 even if forecasts that the economy has begun to contract proved to be true.

A fourth quarter decline in the economy "will not change anything" in the government's ability to meet its 5.7% deficit target for this year, Baroin said in a radio interview.

The French statistics institute Insee said Thursday that France has entered what it believes to be a short recession, with the economy expected to contract slightly in the fourth quarter of 2011 and the first quarter of 2012.